Business Plan for Car Hire Company - Essay Example

Business plan for car hire company In the recent past it has come to be realized that people’s lives are changing and in this connection the ways in which the conduct their activities are also changing. In this connection it should be noted that people are slowly adapting to new ways of travelling from one place to another. This is especially particular with short distances, say around the town or city. People are slowly moving away from the idea of using personal means of travel and are turning to the use of public means such as buses and trains and even taxis. This is where the idea of establishing a car hire business pops up. With the realization of this change in individuals there is a possibility of tapping in and making a gain while at the same time providing a service that is very much needed. When establishing a business, regardless of the type of business it is of essence to be in accordance with the prescriptions of the law. This is something which will not be overlooked when developing the business and for this mater all the requirements will be met. In the United States it is seen that different states have their own laws and modes of operations. The city of choice for the operation of the car hire business is that of New York. The first major reason for this is because of the great population that is located here. This population will act as the target market once the business gets into operation. The business that is to be developed is not just meant to be a local establishment. The current location and operations are just set to be for starters. Other external markets are also being sought. This is especially because the capital that is available together with the revenue which will be gotten from the initial operations may allow for further expansion to other states and also the international market. This development will be very much influenced by the performance of the business in the first six months. The returns that will be gotten in this time period will determine whether the car hire business will be in a position to cover the costs that were encountered in its establishment and also whether there will be a possibility of having extra funds that may be used for expansion. An establishment with such objectives cannot just be set up without adequate knowledge of the environment surrounding it. The P.E.S.T. analysis is the best way of getting to know of these traits in the environment of operation. This analysis will try and point out the effect which the political situation has on the business and its operations. At the same time it will point out the economic factors that influence the performance of a business. These factors include the income and expenditure of the people, the availability of the market and the effects of the global financial issues on the location of the business. The city of New York is one of the major financial hubs in the world. For this reason it is set to be susceptible to changes in the economic conditions, say fluctuations in currency. This and many others will most definitely have an effect on the spending habits of the consumers and this will trickle down to the financial performance of the business. The major headache that comes up when developing any particular business is when it comes to setting up. This is the time the proprietor asks the question of whether it is in order to develop a new establishment altogether or just purchase and refurbish what has already been in existence. The cheaper alternative is the one which is to be sought. After this issue has been sorted out the next thing to deal with will be the availability of inputs and whether the services will be timely. The car hire business can be a tricky one because there are some factors which may be beyond the control of the people involved. One such factor is the case of being stuck in traffic. This is something that can happen at any one time and it cannot be controlled by the car driver or the owner of the business. Aside from the issues dwelling on finances and the availability of the target market there are certain issues which may bring down the functionality of a business if they are not properly looked at and addressed. One of the major issues in this case is that to do with the security of the premises and the vehicles. Before the business goes into operation it will be worthwhile to ensure that cases such as vandalism and theft does not curtail the development of the already established business. The source of funding for the business in this case will come partly from personal savings and partly from a bank loan which will be repayable over a ten year period. At there is the Princess Youth Trust Business Loan though it is not a guarantee. The financial information for the restaurant in the first year is depicted below: Sales 40, 000 pounds Net profit margin 23% Gross profit margin 36% Internal return rate 14% N.P.V @ 10% 25,000 pounds Payback period 10years The ease of entrance and operation in the New York market is something that will very much play to the advantage of the car hire business. This is because there are no barriers to entry and monopolies in the restaurant business here. The funds that are associated with the car business are strictly for the business. For this reason drawings for personal use is something that is not encouraged under any circumstance. If there is any drawing to be made it should be limited to a specific number of times and the drawn amount should be repaid after a given duration. Running the car hire business will not be a cheap affair as such. There are a lot of costs that will start coming up even once the cars are in operation. These costs will include maintenance, payment of drivers, and payment for the garage where the vehicles will be staying among other things. Despite the many financial implications of the business the key issue will be the provision of quality services and not to exploit the target market. For this reason the charges for the car hire will be done per kilometer and this will be done automatically by the distance counter. Cash flow Forecast                               Month: Pre-Start 1 2 3 4 5 6 7 8 9 10 11 12 Totals                               Receipts                           Cash sales   3000 5000 2000 5000 4000 1000 6000 4000 3000  3000 4000 40000 Collections from credit sales                           0 New equity inflow                           0 Loans received                 0 Other                   0 Total Receipts 0 0 3000 5000 2000 5000 4000 1000 6000 4000 3000  3000 4000 40000                               Payments                             Cash purchases   2000 2000 2000 2000 2000             10000 Payments to creditors                   0.00 Salaries and wages     0 Employee benefits                           0 Payroll taxes                           0 Rent                           0 Utilities                           0 Repairs and maintenance                           0 Insurance                           0 Travel                           0 Telephone                           0 Postage                           0 Office supplies                           0 Advertising                           0 Marketing/promotion     3000                     3000 Professional fees                           0 Training and development                           0 Bank charges                           0 Miscellaneous                           0 Owner's drawings                           0 Loan repayments     0 Tax payments                   0 Capital purchases 5000                         5000 Other                   0 Total Payments 5000 2000 3000 2000 2000 2000 2000 0 0 0 0 0 0 18000                                                                                           Balance Sheet Asus Car Hire Forecasted balance Sheet Ending 31st December 2012 Current Assets $ Ending Cash 21000 Supplies 0 Inventory 0 Total 21000 Fixed Assets $ Vehicles 35000 Computers 5000 Furniture 5000 Net Intangible 2000 Total 47000 Total Assets 68000 Current Liabilities Accounts payable 0 Wages and benefits 8000 Non-Current Liabilities Loan 20000 Taxes 7500 Total Liabilities 35500 Equity Common Shares 25000 Retained Earnings 7500 Liabilities+Equity 68000 Liquidity Ratio Current assets/current liabilities 21000/8000 = 2.625 more of the firm’s assets are working for the business. Strengths The business is able to tap into a readily available market since the population of the area where it is located proves to be high. There is greater availability of capital; this is savings from the proprietor, loan from the bank and also the possibility of getting the trust fund. Weaknesses Changes in the consumer preferences may make the people opt for other means of transport for example the use of personal cars. The operations of the business may exceed the projected amounts meaning that other sources of funds have to be sought. References S, Harrison et al (2002), Capital Budgeting: Financial appraisal of investment projects – Cambridge University Press. Boldrin, Michelle (2008), against intellectual monopoly. Cambridge University Press. Kane, Alex et al (2004), Essentials of Investments, 5th ed. McGraw-Hill Irwin. Kell, W. G. et al (1996), Accounting Principles (4th Ed.). New York, Weston, J. (1990), Essentials of Managerial Finance, 9th Ed. International Thomson Publishing Bettner, Mart et al (2008), Financial & Managerial Accounting. Daniels, Mortimer (1980), Corporation Financial Statements. Ayer Publishing Selden, Paul (1997), Sales Process Engineering: A Personal Workshop. ASQ Quality Press Guiltinan et al (1996), Marketing Management: Strategies and Programs. McGraw-Hill Irwin. Read More